Sales of previously occupied U.S. homes fell in August to their slowest annual pace in more than a year, as potential buyers contended with rising mortgage rates and persistent home price growth. Existing home sales dropped 2% from July to a seasonally adjusted annual rate of 3.98 million units, marking the third consecutive monthly decline, according to the National Association of Realtors (NAR).
This sales figure fell short of economists' expectations of a 4 million pace and represents a 1.2% decrease compared to August of the previous year. The last time the annual sales pace dipped below 4 million was in June 2025.
"It’s not a surprise home sales and mortgage rates move in the opposite direction and we have seen mortgage rates rising, rising, rising from February," said Lawrence Yun, NAR's chief economist. He noted that mortgage rates have climbed steadily since February, influenced by rising inflation expectations and surging oil prices, which have pushed up long-term bond yields that guide home loan pricing.
Last week, the average rate on a 30-year mortgage reached 6.71%, its highest point in over a year. Yun cautioned that this rate could soon approach 7%, as mortgage rates tend to follow the trajectory of the 10-year Treasury yield, which continues to increase.
Despite the slowdown in sales volume, national home prices continued their upward trend. The median sales price for existing homes in August increased by 1.6% from the previous year to $429,100. This marks an all-time high for the month of August, based on data available since 1999, and extends a streak of 38 consecutive months of year-over-year price increases.
The U.S. housing market has experienced a prolonged slump since 2022, when mortgage rates began to rise from pandemic-era lows. Sales volume in the preceding year was largely stagnant, remaining at a 30-year low. Decades of significant home price appreciation, particularly fueled by historically low mortgage rates in the early 2020s, have priced many prospective buyers out of the market. A chronic shortage of homes for sale, exacerbated by years of below-average new home construction, has further supported home prices even amid the extended sales downturn.
The homes purchased in August likely went under contract during July and June, when the average 30-year mortgage rate ranged between 6.43% and 6.66%.
The current sales slowdown is contributing to homes remaining on the market for longer periods, which in turn is increasing the number of available properties. Although housing inventory remains below historical norms, there were 1.62 million unsold homes at the end of August, a 3.2% increase from July and a 5.9% rise from August of the previous year. This figure is still short of the approximately 2 million homes that were typically available for sale before the COVID-19 pandemic.
However, the inventory level at the end of August translates to a 4.9-month supply at the current sales pace, the highest level in over a decade. Traditionally, a supply of 4 to 6 months is considered indicative of a balanced market.
While sales declined in August, the overall sales for the first eight months of 2026 remain 1.6% higher than during the same period in 2025, according to NAR.